In the U.S., the royalty is imposed on manufacturers and importers of digital audio “devices” as well as on the manufacturers and importers of digital audio recording “media.” In Canada, the royalty is imposed only on audio recording “media,” not on audio recording “devices.”

In Canada, the royalty is imposed on more types of audio recording media than in the U.S. This is so because the U.S. Copyright Act does not impose a royalty on media “commonly used by consumers . . . for the purpose of making copies of nonmusical literary works . . . ,” even if consumers also (or even usually) use such media to make copies of music (like blank CDs). In Canada, the royalty is imposed on all blank media “ordinarily used” by consumers to make copies of music recordings, including types of media that also are used to make copies of nonmusical works (like blank CDs).

In Canada, the amount of the blank media royalty is determined by the Copyright Board of Canada, in response to “tariffs” proposed by the Canadian Private Copying Collective (which is the organization that collects the levy from those who are required to pay it, and then distributes the levy to those entitled to receive it). When the CPCC proposed its 2003-2004 tariff, it also proposed that the levy be assessed on recording media built into digital music players, like iPods and MP3 players. The Board agreed and adopted royalty rates of $2 for players with up to 1 GB of storage capacity, $15 players with up to 10 GB of capacity, and $25 for players with greater than 10 GB of capacity.

Manufacturers of the players, and the hard drives built into them, appealed the Board’s decision, and the Federal Court of Appeal reversed the Board.

In an opinion by Judge Marc Noel, the court said that it could “readily understand” why the Board wanted to impose the levy on players. “The evidence establishes that these recorders allow for extensive private copying by individuals [and their] use can potentially inflict . . . harm beyond any ‘blank audio recording medium’ . . . .”

Nevertheless, the court ruled that the Canadian Copyright Act simply did not give the Board the authority to impose a levy on players, because the Act specifically refers only to “media.”

Although it is the CPCC job to collect royalties, it also proposed a “zero” tariff on blank media purchased by corporations and others who certify they use blank media for purposes other than copying music. The Board rejected this proposal, saying there was no basis for it in the Canadian Copyright Act. The Federal Court of Appeal agreed.

The Supreme Court of Canada declined to get involved in the case. In a pair of one-sentence orders, the Court “dismissed” applications “for leave to appeal” a decision of the Federal Court of Appeal holding that digital music players — like iPods and MP3 players — are not subject to the levy Canada imposes on blank audio recording media, and corporations and others who do not copy recorded music may not be exempted from the requirement that they purchase blank media on which the levy has been paid.